COVID-19: European Commission activates general escape clause of Stability and Growth Pact

In light of the socio-economic impact of the COVID-19 pandemic, on 20 March 2020, the European Commission adopted a Communication formally notifying the Council that it considers the conditions for activating the general escape clause of the Stability and Growth Pact (SGP) to have been fulfilled.

The activation of the general escape clause was previously announced during a video conference with members of the European Council on 17 March 2020. It was introduced as part of the economic governance six-pack, which was published in the Official Journal on 23 November 2011 and revised the SGP based on lessons learned from the 2008 economic and financial crisis (see Legal update, Economic governance: economic governance six-pack published in Official Journal).

The general escape clause is set out in Articles 5(1), 6(3), 9(1) and 10(3) of Council Regulation (EC) 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and co-ordination of economic policies (as amended by Regulation (EU) 1175/2011) and Articles 3(5) and 5(2) of Council Regulation (EC) 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure (as amended by Council Regulation (EU) 1177/2011). It facilitates the co-ordination of budgetary policies in times of severe economic shock. It will allow member states to pursue a fiscal policy that departs from the budgetary requirements that would normally apply under the European fiscal framework in order to deal adequately with the COVID-19 pandemic.

The Council is now invited to endorse the activation of the general escape clause to provide clarity to member states. If the Council endorses the Commission's proposal, it would be the first time that the general escape clause of the SGP has been activated.

Sources: European Commission: Communication (COM(2020) 123); Press release, Coronavirus: Commission proposes to activate fiscal framework's general escape clause to respond to pandemic (IP/20/499); Questions and Answers, Commission proposes activating fiscal framework's general escape clause to respond to coronavirus pandemic (MEMO/20/500) (20 March 2020).